Trump says in a statement that Coats, a member of the Senate Intelligence Committee before retiring from Congress last year, will lead the new administration's "ceaseless vigilance against those who seek to do us harm."
The post requires Senate confirmation. The office was created after the September 11 attacks to improve coordination among US spy and law enforcement agencies.
Trump's announcement comes one day after release of a declassified government report on Russian efforts to influence the presidential election.
The report predicts Russia isn't done intruding in US politics and policymaking.
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